Nomad Food pre-announces Q4 upside (NOMD)
Nomad Foods pre-announced Q4 results ahead of its presentation at CAGNY yesterday. Management now expects to report Q4 EPS of €.38 vs. €.36. Revenue growth in Q4 is expected to be +9.5% compared to HSD% guidance.
There were several callouts from the presentation:
- The company will benefit from a weaker dollar from translation to US dollars, and 20-25% of COGS is purchased using US dollars.
- Nomad Foods is not seeing the same inflationary pressures in Europe that US companies are facing. Food inflation is expected to be around 2% in 2021.
- Green Cuisine, which launched in 2019, reached €30M in 2020, and the goal is €100M by 2022. It is the fastest-growing plant-based meat brand in Europe, as seen below.
For 2021 management is guiding organic revenue growth of 1-2% and total revenue growth of 3%. Nomad Foods will be one of the few consumer packaged goods companies to report organic revenue growth in 2021, lapping the COVID-19 comparisons. Management expects EBITDA growth in 2021 to be 5% and EPS between €1.50-1.55 vs. a consensus of €1.48. If the company successfully acquired Fortenova, the growth rate will be even higher than the 11-15% outlined. Nomad Foods is on our Best Idea Long list.
Stop & Shop’s 11% comp doesn’t lead to margin expansion (AD-AMS)
Koninklijke Ahold Delhaize reported Q4 EPS of €0.53 vs. consensus of €0.50. Online sales grew 73.4% in Europe and 128.5% in the US. US comp sales ex. fuel increased 11.2%. In Europe, comp sales increased 10.6%. US operating margins contracted 40bps to 3.9% due to COVID-19 costs. When adjusting for the extra week, operating margins contracted 80bps. The US division’s COVID-19 costs were about 50% higher than in Q3 due to incentives, higher sick leave, and safety costs. European operating margins expanded 10bps to 5.1% and were flat adjusted for the extra week.
Management expects online sales to grow north of 30% in 2021, with the Fresh Direct acquisition closing on January 5. EPS is expected to grow at least mid to high single digits compared to 2019. Management said they see some signs of inflation, which is why they planned to bring in 2,000 more private-label SKUs.
U.S. grocery store retail sales accelerated to 11.4% YOY in January from 8.5% in December, boosted by the $600 stimulus checks. The increase in January was the largest since May, as seen in the chart below.
Boston Beer diverts Q4 upside into marketing spend (SAM)
Boston Beer reported Q4 EPS of $2.64 vs. consensus of $2.63. Slightly better revenue growth was offset by weaker margins, particularly in marketing expenses. Depletions increased 26% in Q4, decelerating from 36% in Q3, while shipments increased 54%, accelerating from 30.5% in Q3. The higher rate of shipments led to higher inventory levels at distributors. Distributor inventory levels were said to be at five weeks on hand – an appropriate level. Gross margins contracted 50bps to 46.9% due to increased production at contracted brewers and higher freight expenses. Selling and marketing expense increased 52% in Q4, a significant sequential and YOY step-up.
Management guided 2021 EPS to a range of $20-24 vs. a consensus of $22.51. Management sees the hard seltzer category growing 70-100% in 2021, with Truly gaining share. Depletions and shipments are expected to increase between 35-45%. Gross margins are expected to be between 45-47%, down from 46-48%. Marketing expenses are expected to increase between $120-140M in 2021, down from the previous +$130-150M plan. The marketing spends increase of roughly 25% is similar to 2020.
Truly has begun 2021 in a better inventory position in hard seltzer than many of its peers. It has also launched much of its new product innovation earlier than the competition in 2021. The step-up in advertising spend will also decelerate from Q4. This is all to say, Q1 is likely the peak growth rate for Boston Beer, which is on our Best Idea Short list.
